Responsible Investing Glossary
The active exercising of shareholder rights to improve the long-term value of a company.
A term used in the environmental area to decribe the reduction in levels of greenhouse gas emissions (GHG) achieved as a direct result of investor strategies that differ from an established business-as-usual baseline scenario. There is no established guidance on how to account for this additionality.
Companies that have historically performed better than their peers in terms of ESG factors within a particular industry or sector. It is also considered a positive screening as it seeks to include companies from the investment universe based on criteria relating to their policies, actions, products or services.
Big Society Capital
Big Society Capital is the world's first social investment institution, established by the UK's Cabinet Office and launched as an Independent organisation with a £600m investment fund in April 2012. With the aim of having a transformative impact on the social investment market. Big Society Capital provides finance to organisations that tackle social issues.
Bloomberg New Energy Finance (BNEF)
Founded in 2004, Bloomberg New Energy Finance is a new dedicated source of data, insight and news on the transformation of the energy sector. It is leading provider of transformation to energy companies, investors and governments.
The amount of carbon dioxide released into the atmosphere as a result of the activities of a particular organisation, most often expressed as tonnes of CO2 emission per USD million of revenues.
An investment approach that seeks to optimise the carbon footprint of a portfolio by taking into account the carbon emissions of the securities in the investment universe.
Also referred to as clean technology, cleantech is an umbrella term encompassing the investment asset class, technology, and business sectors that include environmental, sustainable and green products that contribute to reduce CO2 emissions.
The long-term global shift in weather patterns, also linked to global warming.
Coalition for Environmentally Responsible Economies (CERES)
Ceres is a non-profit sustainability advocacy organisation founded in 1989 and based in Boston, Massachusetts. With the mission of "mobilizing investor and business leadership to build a thriving, sustainable global economy", Ceres brings together different stakeholders to accelerate the adoption of sustainable investing practices.
Conference of the Parties (COP) and COP21
A UN conference on climate change that is held annually. The 21st conference (COP21) was held in Paris in December 2015. The conference negotiated the Paris Agreement, a landmark global treaty on the reduction of climate change. The treaty lays out a framework to limit global warming to less than 2°C compared to pre-industrial levels.
The system of rules, practices and processes by which a company is directed and controlled.
Corporate Social Responsibility (CSR)
According to the OECD, corporate responsibility involves the search for an effective ‘fit’ between businesses and the societies in which they operate. The notion of fit recognises the mutual dependence of business and society - a business sector cannot prosper if the society in which it operates is failing and a failing business sector inevitably detracts from general well-being. ‘Corporate responsibility’ refers to the actions taken by businesses to nurture and enhance this symbiotic relationship.
Double bottom line
The concept of a double bottom line extends from the conventional single bottom line – the final measurement of financial performance of an investment – by adding a second bottom line to measure a company’s performance in terms of positive societal impact.
Energy Transition Law (French)
In August 2015 France passed the Energy Transition Law, the first of its kind in Europe, which will come into full effect in June 2017. France has decided to provide a clear signal to institutional investors with this law by encouraging them to become truly engaged on the subject of RI and start considering how to better integrate ESG factors in their investments. The law reinforces the role of institutional investors in financing the transition towards a low-carbon economy and requires more awareness of long-term issues in investment decisions.
Engagement (or shareholder engagement)
The practice of shareholders entering into dialogue with management of companies to change or influence the way in which that company is run.
Environmental, Social and Governance issues that constitute the three pillars of Responsible Investments. E, S, and G are the three central factors in measuring the sustainability qualities of an investment.
An investment process that uses ethical principles and values as a filter for selecting investments.
European SRI (Socially Responsible Investments) Transparency Code
The European SRI Transparency Code focuses on SRI funds distributed publicly in Europe and has been designed to cover a range of asset classes. The code comes with a Guidance Manual for fund managers on how to best use and respond to the Transparency Code. This reporting framework is issued by the European Forum for Social Responsible Investment in Eurosif.
European Sustainable Investment Forum (Eurosif)
Eurosif is the leading pan-European SRI membership organisation whose mission is to promote sustainability through European financial markets. Working as a partnership of Europe-based national Sustainable Investment Forums, Eurosif’s main activities are public policy, research and creating platforms for nurturing sustainable investing practices.
Elements of a company’s behaviour that may not be immediately apparent solely from an analysis of its financial data. Often ESG themes are associated with extra-financial factors.
Fiduciary duties (or equivalent obligations) exist to ensure that those who manage other people’s money act in the interests of beneficiaries, rather than serving their own interests. The most important of these duties are:
Loyalty: Fiduciaries should act in good faith in the interests of their beneficiaries, should impartially balance the conflicting interests of the different beneficiaries, should avoid conflicts of interest and should not act for the benefit of themselves or a third party.
Prudence: Fiduciaries should act with due care, skill and diligence, investing as an ‘ordinary prudent person’ would do.
Source: Fiduciary Duty in the 21st Century, United Nations Global Compact, UNEP FI, PRI and Inquiry, September 2015.
Forest Footprint Disclosure Project (FFDP)
A UK government supported project created to support investors in identifying how an organisation’s activities contribute to deforestation. By collecting data on how businesses are impacting forests worldwide, the project enables a company’s ‘forest footprint’ to be linked to its value.
The Gates Foundation is the largest private foundation in the world, launched in 2000 by Bill and Melinda Gates. It works with partner organisations worldwide to tackle critical problems in four programme areas: global development, global health, education and global policy.
The Generation Foundation was set up in the UK with a mission to bring about progressive change both for the individual and for society as a whole. In particular, the Generation Foundation supports projects that assist in the education and personal growth of children and under-represented groups.
Global Health Investment Fund (GHIF)
The GHIF is a US$108 million social impact investment fund designed to provide financing to advance the development of drugs and other interventions against diseases that disproportionately burden low- and middle-income countries. The fund was set up by the Global Health Investment Corporation, a non-profit organisation with a mission to catalyse global health financing.
Global Impact Investing Network (GIIN)
The Global Impact Investing Network was founded in 2009 by a group of investors brought together by the Rockefeller Foundation. It is a non-profit organisation dedicated to increasing the scale and effectiveness of impact investing. In particular, it works to develop the role of impact investing by building a strong network of investors and leaders.
A term used to describe the heating of the atmosphere owing to the presence of carbon dioxide and other gases. Without the presence of these gases, heat from the sun would return to space in the form of infrared radiation.
Greenhouse Gas (GHG)
Any of various gaseous compounds (such as carbon dioxide) that absorb infrared radiation, trap heat in the atmosphere, and contribute to the ‘Greenhouse Effect’.
A process of making investment decisions based on environmentally conscious criteria, including the low carbon economy and climate change.
Grid parity occurs when an alternative energy source can generate power at a levelised cost of electricity (LCOE) that is less than or equal to the price of purchasing power from the electricity grid.
Impact investing focuses on financing businesses and projects that are designed to have intentional, positive and measurable impacts on society while simultaneously delivering financial market returns. As the social impact is fully embedded into the business model, there need not be an inherent trade-off between impact returns and financial returns. Impact investing harnesses the power of capital towards solving ‘real issues’ facing society. It is about steering the power of capital towards ‘greater utility’.
International Energy Agency (IEA)
The International Energy Agency is a Paris-based autonomous inter-governmental organisation that was established in the wake of the 1973 oil crisis. Today, the IEA acts as a policy adviser to nations in the fields of energy security, economic development, and environmental protection.
Japan Stewardship Code
Introduced in 2014, the Japan Stewardship Code lays out a framework that promotes stronger corporate governance by calling on shareholders to actively exercise their voting rights and engage with the companies in which they invest.
ESG Key Performance Indicator (KPI)
A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving its ESG and impact objectives.
An economy based on low-carbon power sources with minimal carbon emissions into the environment. It makes reference to a world where the temperature increase is contained below 2°C or 1.5°C.
ESG mainstreaming and integration
The incorporation of ESG factors and analysis into investment decisions.
AXA IM’s vision is that delivering RI expertise should not be limited to an offering of RI ‘labelled’ funds only. Since early days, we believed that RI can be materially relevant to all investments and that the attention paid to ESG issues should be shared and integrated across all asset classes and specialist investment teams. This vision to mainstream RI across portfolios has guided the deliberate and purposeful development of our RI expertise for nearly two decades.
An investment approach that excludes some companies or sectors from the investment universe based on criteria relating to their policies, actions, products or services.
Divestment is considered a negative screening. It is the opposite of an investment. In the context of responsible investments, it refers to the sale of stocks, bonds or investment that conflict or are not aligned with specific ESG objectives, values or convictions.
Principles for Responsible Investment (PRI)
The UN-supported Principles for Responsible Investment (PRI) initiative was launched in 2006. The world’s leading proponent of responsible investment, the PRI is an independent organisation bringing together and supporting an international network of investors to put the six Principles for Responsible Investment into practice.
The six Principles are to:
- incorporate ESG issues into investment analysis and decision-making processes
- be active owners and incorporate ESG issues into ownership policies and practices
- seek appropriate disclosure on ESG issues from invested entities
- promote acceptance and implementation of the Principles within the investment industry
- to enhance effectiveness in implementing the Principles
- report on activities and progress towards implementing the Principles
AXA IM was an early signatory to the PRI - in 2007.
A proxy vote is a ballot cast by one person on behalf of another. One of the benefits of being a shareholder is the right to vote on certain corporate matters. Since most shareholders cannot attend the annual and special meetings at which the voting occurs, corporations provide shareholders with the option to cast a proxy vote.
Energy from a source that is not depleted when used, such as wind or solar power.
Responsible investment is an approach to investing that aims to incorporate Environmental, Social and Governance (ESG) factors into investment decisions, to better manage risk and generate sustainable, long-term returns and positive societal impacts.
At AXA IM, we believe that responsible investment consists of an array of factors that will shape the future. Such factors can be sources of risks but can also create opportunities. We believe that being a responsible asset manager is fundamental for sustainable, long-term investment success. In our view, ESG factors have the potential to impact not only investment portfolios across asset classes, sectors, companies and regions but also a multitude of other clients’ and stakeholders’ interests.
Given the diversity of investors’ objectives, strategies and specific portfolio requirements, we provide clients with the opportunity to select the level of ESG integration that best fits their needs, objectives and constraints, as summarised below.
- Avoid: exposures that conflict with your principles & values
- Identify: ESG risks & opportunities
- Invest: by incorporating ESG analysis
- Impact: with outcome-oriented investments
Assets that are rendered worthless or devalued due to issues such as climate, regulatory or market change.
A thematic investment approach refers to the selection of company securities based on specific sustainability themes such as human capital, renewable energy, water use, waste management or other ESG issues.
UN 2030 Agenda for Sustainable Development
An agenda made up of 17 Sustainable Development Goals adopted by world leaders in 2015. The Goals encourage countries to establish national frameworks to end all forms of poverty, fight inequalities and tackle climate change. Each goal has specific targets to be achieved over the next 15 years.
United Nations Conference on Trade and Development (UNCTAD)
Governed by its 194 member states, UNCTAD is the United Nations body responsible for dealing with development issues, particularly international trade. In effect, UNCTAD offers direct technical assistance to developing countries, with the aim of helping them to build the capacities they need to become integrated into the global economy.
United Nations Environment Programme (UNEP)
UNEP was set up in 1972 as an agency of the United Nations to assist developing countries in implementing environmentally sound policies and practices. Today, UNEP is the leading global environmental authority, setting the global environmental agenda within the United Nations system.
UN Environmental Programme Finance Initiative (UNEP FI)
An initiative led by the UN that seeks to encourage the implementation of sustainability principles in financial institutions through the incorporation of ESG factors in risk analyses.
UK Stewardship Code
A code first published by the Financial Reporting Council in 2010 to enhance the quality of engagement between asset managers and companies in the UK. Its principal aim is to make asset managers more active and engaged in corporate governance matters in the interests of their beneficiaries.
UK Sustainable and Investment Finance Association (UKSIF)
UKSIF is the membership association for sustainable and responsible financial services in the UK. In effect, UKSIF works to support and advance the UK finance sector as a world leader in sustainable development through financial services.
World Economic Forum (WEF)
The World Economic Forum is a Swiss non-profit foundation, established in 1972 and based in Geneva. While the Forum does not specialise in any particular field, it engages the foremost political and business leaders to shape global, regional and industry agendas.